Ticker: BASFY, Buy below $20.
BASF is the world’s leading chemical company, with operations sprawling the entire globe.
Why I Would Buy
- Cheap – BASF trades < 10x earnings, and less than 1x Sales.
- High RoE – My favorite metric for measuring company performance is return-on-equity. BASF has consistently earned an RoE between 10-20% during the past decade.
- Good Credit Ratings – Strong long term debt ratings: A1/A by Mooys and S&P.
- Dividend – Close to 5%at these prices, although payout ratio is a tad high.
- R&D spend – I like companies that have generous R&D spend, as it indicates sustainable innovation pipeline. BASF spends 2-3% of gross revenues on R&D.
What Could Go Wrong
- Taxes – US investors face > 26% withholding by Germany. Additionally there is ADR fees to be paid.
- High Payout Ratio – More than 75% of earnings is being paid out as dividends.
Disclosure: I am long BASFY, please read additional disclosures here before taking any action based on this post.